Taxes and dealerships’ corporate structure and post-closing concerns

Internal combustion engine-propelled vehicles will be around for a long time, according to the latest Center for Automotive Research study. Alternative powertrains will represent only eight percent of new car sales by 2030.

That and other findings seem to give dealerships a bit of breathing room as the automotive retail world evolves. The report also says Level 4 and Level 5 autonomous vehicles will represent less than four percent of new car sales by 2030, though that will rise to some 55 percent by 2040.

Nonetheless, automakers will need to continue to invest in those technologies to meet regulatory and consumer demands in other countries, and to have a stake in the future vehicle industry, said CAR CEO Carla Bailo, reported Automotive News.

What does that mean for dealers? In the near term they will be selling the same types of vehicles they have sold for decades, though the technology content of those vehicles will keep increasing.

The study didn’t look at how consumers will buy those vehicles, however. That is where dealerships are already having to adapt, by putting more of the purchase process online and other changes. So, dealers, don’t rest on your laurels even if sales are good.

I listened to a webinar by Crowe Horwath this morning on the implications for dealers of the Tax Cuts and Jobs Act, which Crowe Horwath CPA Joe Magyar called “most complex and convoluted” legislation. One of the main issues dealership must address under the new law, he said, was the relative benefits of a C corp structure versus S corp, especially where intent to distribute profits is concerned.

As luck – or foresight – would have it, we have a column this week looking at an aspect of that issue. Read Don Ray’s piece to gain some insight.

Also this week George Taylor returns to ABSR with a look at some post-closing issues and the importance of resolving them earlier rather than later. For example, why should the buyer of a dealership be concerned with the seller’s distribution of seller funds to shareholders?

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